Overview

An important step towards liberalisation of foreign exchange facilities available to individual residents was, the permission by Reserve Bank of India to allow a resident in India to open, hold and maintain with a licensed Bank (which is also an authorised dealer) in India, a Foreign Currency (Domestic) Account and foreign exchange acquired from any of the sources specified as under can be kept in this account by the resident.

NRE Account

Non-Resident External (NRE) Accounts for NRIs / PIOs

Who can open NRE Accounts?

Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs) are permitted to open these accounts with ADs. (RBI approval required for Bangladesh/ Pakistan individuals)

Types of Accounts

NRE accounts can be of following types: Current, Savings, Recurring, and Fixed Deposit.

Permitted Credits

Remittances to India in any permitted currency.

Deposited by the account holder in person on temporary visit to India:

Current income in India, subject to payment of applicable taxes in India.

Following receipts for assets acquired by debit to the NRE/ FCNR account of the account holder:

Maturity of sale proceeds of any permissible investment in India

Refund of share / debenture subscriptions to new issues of Indian companies or portion thereof

Refund of application / earnest money/ purchase consideration made by the house building agencies / Seller on account of non-allotment of flat / plot / cancellation of bookings / deals for purchase of residential / commercial property together with interest

Any other credit, if covered under general or special Permission granted by Reserve Bank

Investment in shares / securities / commercial paper of an Indian company

Purchase of immovable property in India, provided the same is covered by Regulations/ general or special permission by RBI

Any other transaction as permitted by RBI

Change of Status to Resident

When an NRE account holder returns to India with intention to stay for an uncertain period (for employment/ business/ vocation/ any other purpose):

Accounts should be Re-designated as resident account, or

Funds may be transferred to the Resident Foreign Currency (RFC) (if eligible for maintaining RFC a/c)

Joint Accounts

Permitted to be opened in below cases:

In the names of two or more NRIs or PIOs.

With resident relative(s), as second holder, (eligible to operate as POA holder) on “former or survivor basis”

Operations by Power of Attorney (POA)

POA in favour of a resident permitted for:

Making all local payments

Remittance to the account holder abroad

Investment in India

POA not permitted for:

Repatriation outside India other than to account holder

Gift to a resident

Transfer to another NRE account

Tax Exemption

Interest on NRE deposits not taxable

NRE deposits are exempted from wealth tax

NRO Account

Non-Resident Ordinary (NRO) Accounts for NRIs / PIOs

Who can open NRO Accounts?

Any person residing outside India for the purpose of putting through bona fide transactions in rupees

Individuals/ entities of Pakistan nationality/ origin and entities of Bangladesh origin require the prior approval of the Reserve Bank of India

Types of Accounts

Current, Savings, Recurring, and Fixed Deposit

Currency

Indian Rupees

Joint Accounts

NRIs and/or PIOs jointly with other NRIs and/or PIO

With residents as second holder on “Former or Survivor” basis only.

Permitted Credits

Remittances to India in any permitted currency through banking channels

Any permitted currency deposited by account holder during his visit to India

Transfers from rupee accounts of non-resident banks

Legitimate dues in India of the account holder

Transfers from other NRO accounts

Rupee gift/ loan made by a resident to a NRI/ PIO relative within the LRS limits

Permitted Debits

Local payments in rupees including payments for investments subject to regulations

Remittances outside India of current income of account holder in India net of taxes

Transfers to other NRO accounts

Up to USD 1 Million USD in a FY for permissible purpose (For NRIs/PIOs)

Operations by Power of Attorney (POA)

POA in favour of a resident permitted for:

Making all local payments

Remittance outside India to the account holder of his Indian current income net of taxes

Investment in India subject to conditions

POA not permitted to:

Repatriation outside India other than account holder

Gift to a resident

Transfer to another NRO account

Change of Resident Status

Resident to Non-resident - When a resident account holder leaves India for a country (Except Nepal or Bhutan) for employment / business / vocation or for an uncertain period his existing resident account to be redesignated as NRO Account

Non-resident to Resident - On return of the NRO account holder to India for employment / business / vocation or for an uncertain period his NRO account to be redesignated as resident rupee account

Payment of funds to Nominee

Amount payable to Non-resident nominee from the account of deceased to be credited to NRO account of nominee